Working with Purchase Contracts
When making an offer on a property, either through an agent or FSBO, a purchase contract will always be used. All the details of a purchase contract will not be discussed so if you have specific questions talk to your agent or attorney.
Eighty-five to 90 percent of properties that are for sale are listed with an agent. If you are making an offer on a property where this is the case, the agent over the property will be required to use a purchase contract (unique to each state) and will fill out for you. When the agent fills out the contract, there are certain things you will want to have them change or put in the contract to protect you.
The first thing you’ll want to have in the contract is a 14-day inspection period. Every state will have a different standard for their inspection period but make sure it’s changed to at least 14 days. In states where the inspection period is longer than 14 days, feel free to keep the standard inspection period. Sometimes the inspection period will be called the due diligence period. The due diligence or inspection period gives you 14 days to cancel the contract without losing any of your earnest money in the chance that you find out something you don’t like about the property.
A second change you can make in the contract is the amount of earnest money you will put down. In general, it’s a good idea to keep earnest money between $500-$1000. Some government foreclosures like Fannie Mae or HUD may require up to 10% earnest money, so you might have to go over $1000 on those specific foreclosures. Push your agent to put in the lowest amount of earnest money possible.
The last part of the contract you need to pay attention to is the addendums or additions. This is where you can give yourself the right to assign the contract, the right to show the property, or include a partner’s inspection and approval. Additionally, anything that is not in the contract that you would like included or anything in the contract you want to change will go in here.
When making an offer, you’ll need to tell the agent the specifics you want in the contract and then double check to make sure they were put in before you sign. You do not have to be an expert on contracts, you just need to know how to protect yourself, and by checking these three elements, you can.